As reported in the Business Daily this week, the Trade ministry has at last acknowledged the devastating impact of the 17.5 percent Export Promotion Levy on clinker and steel billet imports. This policy, in place for over two years, has severely hindered two crucial economic sectors.
Cabinet Secretary Lee Kinyanjui’s appeal to Parliament for its repeal is not merely a policy reversal; it represents a vital lifeline for thousands of jobs, a clear rejection of monopolistic cartels, and a demonstration of decisive leadership. For this, we express our profound appreciation.
Introduced in July 2023 under the guise of boosting local production, the levy was presented as a patriotic measure to foster domestic industries. However, it quickly devolved into a classic case of policy capture, where powerful interests within government and the private sector manipulated public policy to solidify their dominance. Clinker, a crucial raw material for cement, has become prohibitively expensive for cement manufacturers. This led to factories operating at a mere 60 percent capacity, resulting in a staggering 7.9 percent drop in national cement production last year alone-a loss of 763,500 tonnes (over 15 million, 50kg bags equivalent annually).
Exports to key East African markets like Uganda and Tanzania plummeted by nearly 50 percent, eroding Kenya’s competitive edge and inflating building costs.
The same 17.5 percent levy on billets and other imports stifled downstream manufacturing, drove up prices for reinforcement bars and rods, and triggered widespread job losses as mills scaled back operations.
What was touted as an ‘export promotion’ tool benefited only a select few, creating artificial scarcities and unhealthy rivalries that disadvantaged smaller players and betrayed the very industries it claimed to protect. The official statistics, while alarming, only hint at the true extent of the damage. They fail to capture the hundreds of micro, small, and medium enterprises that were utterly destroyed by this levy, particularly in the production of steel wire products like nails, barbed wire, and mesh.
The monopolistic environment it fostered forced these small operators to procure raw materials in extremely large, dollar-denominated minimum order quantities, effectively pricing them out of existence overnight.
Consider the heartbreaking example of a company in Kikuyu Constituency, where the owner had invested Sh300 million from his retirement savings and the sale of properties. Employing 300 people and contributing significantly to local livelihoods, this company was forced to shut its doors after the levy hit, leaving its workers jobless. This is just one of thousands of employees whose dreams were deferred due to misguided policy.
This was no innocent oversight. Previous occupants of the Trade docket, armed with extensive data on the levy’s destructive ripple effects, chose inaction and convenience.
The minister’s forthright admission that the levy has created an unfair market marks a refreshing departure from this pervasive malaise.